28 construction firms at Ala Moana violated labor laws, state says

2015-11-13T02:14:23Z2015-11-13T03:49:26Z

HONOLULU (HawaiiNewsNow) -

On the same day Ala Moana Center opened its new Ewa wing of 30 new shops, the state Labor Department said construction companies that built those shops were guilty of widespread violations of basic labor laws and requirements.

A state Labor Department investigation found 28 contractors and subcontractors working on high-end stores in the new wing were violating the law by not paying unemployment taxes.

"I'm very disappointed, actually, that so many companies are ignoring some very basic foundation things as protections for not only their employees but for themselves as companies because it protects them from some liability," state Labor Director Linda Chu Takayama said.

Chu Takayama said seven of those construction firms also failed to pay pre-paid health insurance and temporary disability insurance for their workers.

"We do view it as a good wake-up call to some of these businesses that have not been following the rules," Chu Takayama said.

Since the case is still under investigation and final penalties have not been determined, the state will not yet release the names of the construction crews violating the law. Labor officials said the stores themselves are not liable for wrongdoing, only the construction firms that built them since those contractors and subcontractors employed the workers in question.

Just one of the outlets whose construction crews are under investigation did not open Thursday. The "coming soon" sign is still up at the restaurant called Cafe Lani.

But sources said state inspectors raided construction sites Oct. 26 at the following retailers that opened Thursday: Hugo Boss, athletic apparel store Lululemon, high end lingerie store La Perla, women’s clothing retailer St. John Knits, purse and bag retailer Aqua Blu, and chocolatier Pierre Marcolini.

Informants for the Hawaii Construction Alliance – a coalition of five construction unions – shot undercover video of workers getting paid “off the books” in cash. Informants said they were paid $30 in cash an hour and never filled out tax forms or were given a pay stub, as required by law.

A project manager told one worker in the undercover video he was under tremendous pressure to finish by Nov. 12, since their original target date was Sept. 2, and they were running behind.

Penalties for some of these violations are incredibly low, just $1 per employee per day for a minimum of $25 for not paying temporary disability insurance. Those TDI fines haven't increased since they were established in 1969.

Chu Takayama said her department will ask state lawmakers to increase those fines next year.

"We'd like to move it to $100 per employee per day with a minimum of $500. And maybe that will cause some companies to sit up and take notice," Chu Takayama said.

The state tax and business departments are conducting their own investigations of construction companies that worked on the Ala Moana expansion, looking into possible licensing and tax violations.

The investigations could take months to complete, Chu Takayama said.

Hawaii News Now wanted to know what General Growth Properties, which owns Ala Moana, is doing about this situation, where there appears to have been widespread disregard for the law among the crews working at Ala Moana. Hawaii News Now also asked GGP if it had stopped any work at any of these sites because of violations of GGP's own construction rules and guidelines, which say work can be shut down construction for violations.

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